Question

EB15.

LO 6.5Using this information from Outdoor Grills, what is the cost per unit under both variable and absorption costing?

Answer 1

Cost per unit under variable costing $

Direct material 110

Direct labour 150

Variable manufacturing overhead 75

Cost per unit 335

Cost per unit under absorption costing $

Direct material 110

Direct labour 150

Variable manufacturing overhead 75

Fixed manufacturing overhead ($2,700,000/90,000) 30

Cost per unit 365

Step-by-step explanation:

In variable costing, cost per unit is calculated by the addition of all variable costs while in absorption costing, fixed manufacturing overhead application rate is added to the variable costs in order to obtain the cost per unit.